Exxon begins drilling in Russian Arctic immune to sanctions.

Bloomberg: “Sanctions, what sanctions? ExxonMobil Corp. will start drilling a $700 million well in the Arctic Ocean tomorrow, Russia’s government said, showing that for all the talk of action against Vladimir Putin’s oil industry, the largest U.S. energy company is undeterred.”“As Russia’s relations with Europe and the U.S. deteriorated to the lowest point since the Cold war over the conflict in Ukraine, the European Union imposed a third round of sanctions last week, restricting the export of equipment used for offshore oil production. That doesn’t affect Exxon’s plans because the contract to hire the rig was signed before the measures were announced.
Developing the Arctic is vital for Russia, where energy provides half the state’s revenue, to maintain oil production near a post-Soviet high of more than 10 million barrels a day. For Exxon, where output fell to a five-year low in the second quarter, a discovery would offer a vital new source of crude.
….After more than two years’ planning Exxon and its partner OAO Rosneft, Russia’s state oil producer, will start drilling the Universitetskaya prospect tomorrow, the Kremlin said in a statement today. Putin will give the signal to start Russia’s northernmost well accompanied by Rosneft Chief Executive Igor Sechin, who’s subject to U.S. sanctions himself, and Exxon Mobil Russia head Glenn Waller.
….Universitetskaya is the first of as many as 40 offshore wells Rosneft plans by 2018 to test the potential of the unexplored the Arctic Ocean. The geological structure targeted by the drilling is roughly the size of the city of Moscow and may contain as many as 9 billion barrels of oil, according to a presentation on Rosneft’s website.
“It is an anomaly in the current situation and just how long major western companies, such as Exxon, can carry on doing this, is anybody’s guess,” said John Lough, a London-based associate fellow at Chatham House, a London-based foreign policy research group. “They are light sanctions at the moment in terms of the energy industry.”
Exxon isn’t the only western oil company involved. BP Plc, the U.K.’s second-largest oil company by value, has an interest through it’s 20 percent stake in Rosneft.
The West Alpha rig, leased by Exxon from Bermuda-based Seadrill Ltd., is currently in Kara Sea about 72 miles off the coast of Novaya Zemlya, according to data compiled by Bloomberg.
Drilling will take about 70 days, a period that should be sufficient to assess the reserves of any discovery, Rosneft’s head of offshore, Zeljko Runje, said on a call with analysts last week. The area is relatively free of icebergs, meaning work is ready to start, he said.
….Russia has responded by banning food from the EU and U.S. yesterday and threatened to limit overflights from Europe to Asia. That means that in the future, Exxon-led crews on drilling rigs may not even be able to eat food from America. Air travel will be no problem as the only way to reach the remote deposit is a four-day sail from Murmansk, the Arctic’s largest city.
….The Exxon-Rosneft cooperation also includes a $300 million investment in Russian shale pilot projects, which now risk being suspended, Rosneft Chairman Alexander Nekipelov said on July 29. Exxon has come under pressure and showed surprising perseverance, Nekipelov said at the time.”